Final HRA ruling broadens employer group health options

A new rule on Health Reimbursement Arrangements (HRA) allows employees to pay for individual health plans with a new type of HRA. Previously, this rule was only applicable to employers with fewer than 50 employees under the use of a QSEHRA; the new ruling creates application options for employers of all sizes.

What’s new
To accommodate the new ruling, two new HRA types were created, an independent care HRA (ICHRA) and an excepted-benefit HRA. An ICHRA would allow employers to reimburse employee health expenses but is exclusive for employees who are not offered more traditional group coverage. For employees who are offered group coverage, an excepted-benefit HRA will allow employers to exclusively reimburse premiums for additional benefits such as dental and vision or other ACA-exempt benefits, such as COBRA. The excepted-benefit HRA can be used even if the individual does not enroll in the offered employer group coverage.

The final rule also clarifies that individual-market insurance will not necessarily fall under an Employee Retirement Income Security Act (ERISA) plan when working in conjunction with an ICHRA or qualified small-employer HRA (QSEHRA), so long as the specified requirements are met.

There will be a special enrollment period allowing employees who receive an employer-funded ICHRA or a QSEHRA to buy individual-market coverage.

Compliance need-to-knows
It’s important to note that employers can only offer one type of health coverage to employees, the employee cannot choose between an ICHRA-funded health plan and group coverage. However, the employer can create distinct classes of employees and offer different forms of coverage to each class. These classes must be marked by specific employment characteristics, i.e. location, full or part time status, etc. All employees in a given class must be provided the same terms for their coverage. The only exception to this rule is employers are permitted to increase the HRA funding amount for older employees or employees with more dependents. For a more detailed list of employee class requirements, click here.

Because the offer of an ICHRA will automatically disqualify eligible employees from receiving premium tax credits or subsidies when purchasing ACA individual-market coverage, employers are required to provide a notice to all employees at least 90 days prior to the beginning of the plan year. This limitation on tax credits and subsidies applies even if the employee chooses not to participate in the ICHRA. To aid employers, the DOL published an Individual Coverage Model Notice. This model also includes a required disclosure provision to explain the coverage being offered.

Small business options
Employers with fewer than 50 employees still have the option of an QSEHRA in addition to the new option of an ICHRA. Both available options have advantages and disadvantages employers should be aware of and consider when making the decision of which to offer.

QSEHRA vs. ICHRA

Employers can expect a more comprehensive explanation of ICHRA requirements for ACA compliance in the coming months. If you have any questions or are interested in this new option for your business, call NueSynergy today at 855.890.7239.